There has been some focus on the need for better regulations to protect member pensions and some provinces are currently reviewing regulations to better allocate risks of
unfunded liabilities between members and the companies (Baldwin & FitzGerald, 2010).
This analysis evaluates the determinants of two unexamined choices made by plan administrators regarding the methods they use to establish schedules for new benefit accrual rates and for paying down the plan's
unfunded liabilities. Both of these decisions impact the amount of their state's funding requirement in a given year.
In fact, after a time, some elected officials would actively encourage county management to be mindful of the
unfunded liabilities and to make sure they were being addressed.
Unfunded liabilities are more than a short-term problem; Rich and Zhang estimate that if current pension deficits were to be eliminated over a period of 30 years, the increased annual tax burden would be $1,385 per household (2014, 1).
The value of
unfunded liabilities, as Troy Davig, Eric M.
The letter goes on to say that keeping the annuity program in-house, even if the interest rate were changed, could still lead to the possibility of
unfunded liabilities. In addition, the board of trustees noted that Indiana law gives INPRS the ability to enter into an agreement with an insurance company to provide annuities to retired members.
The difference has prompted critics to claim that the funds are underreporting their
unfunded liabilities, or the gap between what they've promised to pay retirees in the future and what they'll actually have on hand to cover the benefits.
For the closed local pension plans that have already consolidated with LOPFI but are still faced with
unfunded liabilities, help could be on the way if Amendment 2 passes in the November election.
So worst-ish case scenario: Illinois has, say, $125 billion in
unfunded liabilities that are the responsibility of, say, 2.5 million households.
And Medicaid, which provides health care for lower income people, also has trillions of dollars of
unfunded liabilities that are being paid with tax and newly issued debt dollars.
Don't confuse the debt with the
unfunded liabilities for programs like Social Security, Medicare and Medicaid.
"This means discounting either with a taxable state-specific municipal yield curve, which credits states for the possibility they could default on pension payments, or with a Treasury yield curve, which presents the benefit payments as default-free." The states estimate their
unfunded liabilities at just under $1 trillion.
